Has Bitcoin Jumped the Shark?

[Smaulgld]

Last Thanksgiving Bitcoin was on a roll. Recently discovered by the mainstream media and the subject of Congressional hearings, Bitcoin was declared a legitimate financial instrument by the U.S. Justice Department, hailed as a "game changer" and identified (incorrectly) as "holding promise" by Ben Bernanke the then Chairman of the Federal Reserve. The price of Bitcoin soared from around $200 at the start of November to over $1200 on Mt. Gox in early December.


In just a few months Bitcoin has gone from being on top of the world to falling out of favor. While the Bitcoin technology holds massive promise, the price of Bitcoin does not.

The recent tax ruling is a lot worse than people think.


It's time to call "dotbomb" on Bitcoin.


It's 15 minutes of fame is coming to an end.


Bitcoin has jumped the shark.


Here's why:

http://smaulgld.com/bitcoin-jumped-shark/

[mczerone]

Care to make an argument here on this forum, or are you just ad-baiting?

[TonySutton]

Sorry if you can't put together a compelling argument here in this forum I see no reason to follow the breadcrumbs over to your website.

[wizardwatson]

Only novel thing about BC is the transactional verification mechanism (the block chain). It's P2P only in the network sense. In the currency sense it's no different than the old LETS exchange system proposed years ago by Michael Linton complete with it's arbitrary initial distribution.

It's nerdware with an adolescent concept of currency smeared on top.

People proposing BC as an alternative or solution to the fractional reserve and credit problem should try to understand it better. What it shows to me is that people are more attracted to "sticking it to the banking system" than they are with trying to understand and find a solution to the problem.

[PaulConventionWV]

Care to make an argument here on this forum, or are you just ad-baiting?

I clicked on the link. It's really not worth the read. They have been known to be biased against bitcoin for some reason, and made several false and dubious claims in the article. It's really just another hype piece declaring "bitcoin is dead" yet again. For instance, they are quick to point out that it has dropped %60 percent in value since its peak, but they ignore that it dropped at least 80% in the last bubble. They also claim the IRS declaring bitcoin as property is a bad thing because of a "psychological blow" (as if an IRS label mattered to anyone) and because people would have to track ever transaction. This is not true. Only when it's converted to fiat are people required to calculate profit/loss, a simple addition or subtraction.

They claim that "bitcoin has jumped the shark" and make a fonzie reference (I thought that was a good thing??). I should note that I do not currently have any position in BTC because, admittedly, there is a risk of another collapse, but this article adds nothing new or insightful except, apparently, blind hatred of the bitcoin technology.

[PaulConventionWV]

Only novel thing about BC is the transactional verification mechanism (the block chain). It's P2P only in the network sense. In the currency sense it's no different than the old LETS exchange system proposed years ago by Michael Linton complete with it's arbitrary initial distribution.

It's nerdware with an adolescent concept of currency smeared on top.

People proposing BC as an alternative or solution to the fractional reserve and credit problem should try to understand it better. What it shows to me is that people are more attracted to "sticking it to the banking system" than they are with trying to understand and find a solution to the problem.

Calling it "BC" shows what you know about it...

[wizardwatson]

Calling it "BC" shows what you know about it...

I didn't realize adopting jargon was a prerequisite for understanding. What shows I don't understand is a convincing argument that it solves the problem.

Calling it "BC" shows what you know about it...

... indicates you probably don't have one.

[muh_roads]

What shows I don't understand is a convincing argument that it solves the problem.

What is your "convincing argument" and what is the "problem"?

[PaulConventionWV]

I didn't realize adopting jargon was a prerequisite for understanding. What shows I don't understand is a convincing argument that it solves the problem.

It's not jargon. It's the trading symbol for bitcoin. BC doesn't mean anything.

... indicates you probably don't have one.

Actually, I just don't fancy a debate right now. Sorry.

[muh_roads]

It's not jargon. It's the trading symbol for bitcoin. BC doesn't mean anything.

BC is actually Blackcoin.

[mczerone]

Only novel thing about BC is the transactional verification mechanism (the block chain). It's P2P only in the network sense. In the currency sense it's no different than the old LETS exchange system proposed years ago by Michael Linton complete with it's arbitrary initial distribution.

It's nerdware with an adolescent concept of currency smeared on top.

People proposing BC as an alternative or solution to the fractional reserve and credit problem should try to understand it better. What it shows to me is that people are more attracted to "sticking it to the banking system" than they are with trying to understand and find a solution to the problem.

You just called bitcoin a bunch of names. You admit that it has made some progress in technology, but dismiss it as less-than-marginal without any argument.

One question: Is the free-entry bitcoin money system better or worse for users than traditional banking and currency?

[wizardwatson]

You just called bitcoin a bunch of names. You admit that it has made some progress in technology, but dismiss it as less-than-marginal without any argument.

One question: Is the free-entry bitcoin money system better or worse for users than traditional banking and currency?

How can we base the efficacy of an economic mechanism like a currency based on individual utility? If that is the test then obviously they are better off with the current one as the risk of bitcoin and its clones is too high.

The only thing "the bitcoin protocl concept" (for those of you nitpicking about labels for individual incarnations) even claims to fix is the inability to "inflate" it. They see the deflationary aspect as a non-issue and perhaps even a bonus (mises people I'm sure would agree). But inflation isn't prevented by numerically constraining a volume as the fluctating values have shown, I would say this constraint harms it in fact. Which is why people will just-and have just-started new ones.

A real solution will involve a means to validate reserves, decentralization of reserves, and sufficient auditing to mitigate claiming erroneous amounts of reserves. Everyone talked about gold-backed this and that, which I also disagree with being necessary, but now bitcoin apparently is "way better" than what we have and what? reserves are no longer a primary concern?

I'm not saying bitcoin type ideas aren't the future, I'm saying that this incarnated cryptocurrency bonanza isn't going to fix the problem. The problem is how to make a currency difficult to manipulate. Bitcoins fixed volume does nothing since you can just deploy more instances.

[newbitech]

How can we base the efficacy of an economic mechanism like a currency based on individual utility? If that is the test then obviously they are better off with the current one as the risk of bitcoin and its clones is too high.

The only thing "the bitcoin protocl concept" (for those of you nitpicking about labels for individual incarnations) even claims to fix is the inability to "inflate" it. They see the deflationary aspect as a non-issue and perhaps even a bonus (mises people I'm sure would agree). But inflation isn't prevented by numerically constraining a volume as the fluctating values have shown, I would say this constraint harms it in fact. Which is why people will just-and have just-started new ones.

A real solution will involve a means to validate reserves, decentralization of reserves, and sufficient auditing to mitigate claiming erroneous amounts of reserves. Everyone talked about gold-backed this and that, which I also disagree with being necessary, but now bitcoin apparently is "way better" than what we have and what? reserves are no longer a primary concern?

I'm not saying bitcoin type ideas aren't the future, I'm saying that this incarnated cryptocurrency bonanza isn't going to fix the problem. The problem is how to make a currency difficult to manipulate. Bitcoins fixed volume does nothing since you can just deploy more instances.

and divide the current instance into infinity.

[wizardwatson]

and divide the current instance into infinity.

Exactly. They say in the wiki that the limits "are only client specific", meaning any parameter can simply be modified whenever a majority of the operators upgrade to the new client.

What does this tell us? It tells us that the economic policy of the currency is at the whim of the coders and the operators. If the real problem is to be fixed the "fixing" needs to be clearly explained and any "upgrades" also need to be clearly justified. Bitcoin concept, what makes it "special" is understood by effectively zero % of people in general. And the idea imo that it can be promoted as a bridge into sound money is putting the cart before the horse. It can't "seem" to fix something, and if we just use it the real problem of why we needed something else will be clear when we all use it.

Bitcoin is false hope for those who truly believe in implementing sound money. It seems to mainly hold appeal because it is "sticking it to the man".

If the stories that came out about who Nakamoto is are to be believed then it only makes sense that a paranoid government worker who despises government encroachment would design a system that appeals to other paranoids who despise government encroachment.

They can all hang out in Satoshi's pagoda of paranoia and marvel at a useless distraction that has spawned an army of currency manipulators who are wallowing in the spoils and riches they've gained from a process that is the very antithesis of sound money.

[Keith and stuff]

1 of the main problems with Bitcoin right now is it is mostly just traded in the US. The rest of the world needs to start paying attention.
http://bitcoincharts.com/markets/

[muh_roads]

Exactly. They say in the wiki that the limits "are only client specific", meaning any parameter can simply be modified whenever a majority of the operators upgrade to the new client.

What does this tell us? It tells us that the economic policy of the currency is at the whim of the coders and the operators. If the real problem is to be fixed the "fixing" needs to be clearly explained and any "upgrades" also need to be clearly justified. Bitcoin concept, what makes it "special" is understood by effectively zero % of people in general. And the idea imo that it can be promoted as a bridge into sound money is putting the cart before the horse. It can't "seem" to fix something, and if we just use it the real problem of why we needed something else will be clear when we all use it.

Bitcoin is false hope for those who truly believe in implementing sound money. It seems to mainly hold appeal because it is "sticking it to the man".

If the stories that came out about who Nakamoto is are to be believed then it only makes sense that a paranoid government worker who despises government encroachment would design a system that appeals to other paranoids who despise government encroachment.

They can all hang out in Satoshi's pagoda of paranoia and marvel at a useless distraction that has spawned an army of currency manipulators who are wallowing in the spoils and riches they've gained from a process that is the very antithesis of sound money.

I can tell you've never owned a business. Saving 3-4% that you would normally pay to a CC merchant account is huge savings for companies. Did you know Western Union charges 10% in fees for sending money to Canada or Mexico?

I'm simply not going to entertain this swill. From the very first sentence you demonstrate you don't understand what a code fork is.

Paypal is going to integrate Bitcoin sooner or later now that Square has integrated for mPOS. "PayPal Here" will need to eventually compete.

https://www.paypal.com/us/webapps/mp...it-card-reader

Any of you that want to listen to this guy will miss out on opportunity of a lifetime to be part of a new revolution. Payment processors that are for and by the people.

[KCIndy]

If the stories that came out about who Nakamoto is are to be believed then it only makes sense that a paranoid government worker who despises government encroachment would design a system that appeals to other paranoids who despise government encroachment.

That I.D. has been pretty well discredited.

They can all hang out in Satoshi's pagoda of paranoia and marvel at a useless distraction that has spawned an army of currency manipulators who are wallowing in the spoils and riches they've gained from a process that is the very antithesis of sound money.

Dude. Simple enough... If ya don't like it, don't use it.

Seriously, with all due respect and meaning no offense, I've never, ever been able to understand how or why Bitcoin can generate such a vitriolic reaction in some people.

[Tod]

It does seem to be on a downward slide..... :-(

It would sure be nice if it had the easy anonymity of cash.

[KCIndy]

It does seem to be on a downward slide..... :-(

It would sure be nice if it had the easy anonymity of cash.

I'm waiting for it to slide below $450 so I can make another buy, but it's stubbornly refusing to do so!

[Dianne]

I'm waiting for it to slide below $450 so I can make another buy, but it's stubbornly refusing to do so!

I bought yesterday around $458. So based upon my past track record, I would anticipate btc to drop to $358 today

I found this article from a year ago: It is amusing that btc rose to $100. on April 1, 2013 and now people are moaning that it has dropped to mid $400's. There seems to be lots of good btc news. I would assume the author's sour grapes prediction is based upon frustration he or she didn't invest when btc was cheap.



http://www.forbes.com/sites/timothyl...yperdeflation/

My friend Joe Weisenthal argues that Bitcoin is “now in a terrible state of hyperdeflation,” with the currency’s value rising from $13.50 to $100 in just the last three months:

So a few weeks ago, a pizza might have cost you one Bitcoin. Today it might only cost you a fifth of a Bitcoin, which sounds great, but then if you’re looking at the above chart, why would you spend anything?

Why would you buy a pizza (or pot or anything else) when tomorrow your Bitcoin will be worth more? With this kind of chart, you’d be insane to do anything but horde your coins.

Deflation is harmful for conventional currencies because, in economist jargon, Bitcoins are a unit of account as well as a medium of exchange. When you buy a house, your mortgage is likely to be denominated in dollars. So if the value of a dollar doubles, you might find yourself unable to make your mortgage payments. Similarly, because most wages are denominated in dollars and workers resist nominal wage cuts, deflation can force employers to lay off employees.

[squarepusher]

Bitcoin has some big flaws in my opinion.
1) a transaction can take up to 10 minutes to process, so how is someone expected to goto the store and 'buy' something with it?
2) Bitcoin is not regulated, so basically that means any Tom, Dick or Harry can setup an 'exchange' and collect money. Lets say these people get greedy and decide to steal everything (which has happened several times already). Well, thats too bad, nothing can be done, its unregulated.

I think Bitcoin to most people is just a way to get rich or an 'investment.' Imagine all those people who bought bitcoins for pennies, now its worth hundreds, obviously is a lot of 'hype' as everyone wants to try to drive the price up like an investment, when in fact it is a currency, and having price stability is important for a currency.

[PaulConventionWV]

Bitcoin has some big flaws in my opinion.
1) a transaction can take up to 10 minutes to process, so how is someone expected to goto the store and 'buy' something with it?
2) Bitcoin is not regulated, so basically that means any Tom, Dick or Harry can setup an 'exchange' and collect money. Lets say these people get greedy and decide to steal everything (which has happened several times already). Well, thats too bad, nothing can be done, its unregulated.

I think Bitcoin to most people is just a way to get rich or an 'investment.' Imagine all those people who bought bitcoins for pennies, now its worth hundreds, obviously is a lot of 'hype' as everyone wants to try to drive the price up like an investment, when in fact it is a currency, and having price stability is important for a currency.

So... you're coming out in favor of moar regulation? On RPF? Am I reading that right?

[PaulConventionWV]

I'm waiting for it to slide below $450 so I can make another buy, but it's stubbornly refusing to do so!

Does the image run off the edge of the screen for you guys? There's supposed to be some forecast lines to the far right.

[kpitcher]

Bitcoin has some big flaws in my opinion.
1) a transaction can take up to 10 minutes to process, so how is someone expected to goto the store and 'buy' something with it?
2) Bitcoin is not regulated, so basically that means any Tom, Dick or Harry can setup an 'exchange' and collect money. Lets say these people get greedy and decide to steal everything (which has happened several times already). Well, thats too bad, nothing can be done, its unregulated.

I think Bitcoin to most people is just a way to get rich or an 'investment.' Imagine all those people who bought bitcoins for pennies, now its worth hundreds, obviously is a lot of 'hype' as everyone wants to try to drive the price up like an investment, when in fact it is a currency, and having price stability is important for a currency.

1) There are solutions with 'green' addresses. Many bitcoin payment processors that offer to handle the selling of products with bitcoin, like coinbase, provide instant sales as soon as you send the bitcoin. Buy something online with bitcoin through a tigerdirect or onsale and the checkout process is as fast as a credit card.

2) As more things can be bought and paid for with bitcoin there is less need for exchanges so you can keep the coins in your own wallet out of the hands of dubious exchanges. Some places have announced insurance on deposits will be coming. (No exchanges that I know of yet, other services). Users can have a choice on what services they want from their exchanges. In my view it's no different than deciding to play with penny stocks compared to NYSE.

[amonasro]

I bought yesterday around $458. So based upon my past track record, I would anticipate btc to drop to $358 today

I think you did well. Calling the bottom is as much about technical analysis as judging sentiment, i.e. buying when there's blood on the streets.

Bitcoin has some big flaws in my opinion.
1) a transaction can take up to 10 minutes to process, so how is someone expected to goto the store and 'buy' something with it?
2) Bitcoin is not regulated, so basically that means any Tom, Dick or Harry can setup an 'exchange' and collect money. Lets say these people get greedy and decide to steal everything (which has happened several times already). Well, thats too bad, nothing can be done, its unregulated.

I think Bitcoin to most people is just a way to get rich or an 'investment.' Imagine all those people who bought bitcoins for pennies, now its worth hundreds, obviously is a lot of 'hype' as everyone wants to try to drive the price up like an investment, when in fact it is a currency, and having price stability is important for a currency.

Transactions normally take 10 minutes to confirm (and longer for 6 confirms, the standard time to wait for large transactions) but the money appears right away in the wallet. So I can see the money has been sent, and based upon the fact that Bitcoin has never seen a double-spend and never will barring SHA256 being broken (good luck there), unless I'm moving huge amounts of money around I'm fine to wait for zero transactions in most cases. This is the great thing about zero third-party trust: If Bitcoin's track record is perfect, it's easy to trust. I can be 99.99999999999999% sure that the money I am sent will get confirmed.

You make a good point about regulated exchanges but now, the risk matches the reward. Yeah, you have to send your money to shady places to trade. However they ended up much better off, even when taking these risks and losing a few coins here and there. Think of them as very expensive lessons in Bitcoin security. Smart money can and must mitigate risk by performing due diligence when choosing exchanges and banks as the ecosystem is very young and full of minefields for those who don't. It also must understand cryptocurrencies on a high technical level to see the value of distributed blockchain technology, of which currency is simply one application.

Thinking forward a few years, if Bitcoin survives, centralized, regulated exchanges may actually work against the average Joe. They will pop up, everyone will flock to them for safety and a few Big Boys will emerge, much like Wall Street. In addition to driving up the price like crazy (everyone will wonder where all the bitcoins went at this point), these centralized, protected, "safe" exchanges will attract major money and cause big, experienced traders to play off each other while small traders fight over scraps (kind of like how Wall Street works now). It will enable high-frequency trading, a technique that puts fiber optic/internet connections closer to centralized exchanges, thereby allowing large traders to see the market a few milliseconds before the smaller guys and frontrunning their orders for a tiny profit. Even the current Wall Street guys, reliant and trusting of regulations to protect their money, were ignorant of this as it was happening under their noses. It was the nerds who innovated around this antiquated, highly-regulated system that got the upper hand.

Eventually, having unregulated (as much as possible), worldwide crypto-to-crypto exchanges is the way to go, where the exchanges must fiercely compete for customers, thereby offering outstanding security, customer service and proof of reserves. The understanding and awareness within the crypto community must be and will be very high, and shenanigans by those attempting to game the system will be recognized and outed. Trust for crypto-based businesses will be valued highly and reward those with integrity, trust and intelligence. Criminals will be marginalized will have less and less incentive to practice, lest they be banished from the crypto community and suffer the same fate as our poor friend Mr. Karpeles and dozens of others before him.

[mczerone]

...But inflation isn't prevented by numerically constraining a volume as the fluctating values have shown, I would say this constraint harms it in fact. Which is why people will just-and have just-started new ones....

No different than paper currencies, or asset backed currencies generally.

A real solution will involve a means to validate reserves, decentralization of reserves, and sufficient auditing to mitigate claiming erroneous amounts of reserves. Everyone talked about gold-backed this and that, which I also disagree with being necessary, but now bitcoin apparently is "way better" than what we have and what? reserves are no longer a primary concern?

Exactly. The "reserves" are the hashers/miners. The auditors are the hashers/miners/coders. The validation is the hashers/miners. And they get a payment from the system to do these jobs. And anyone can join them.

There is not a need for an asset to lay fallow for a network of people to have a medium of exchange.

I'm not saying bitcoin type ideas aren't the future, I'm saying that this incarnated cryptocurrency bonanza isn't going to fix the problem. The problem is how to make a currency difficult to manipulate. Bitcoins fixed volume does nothing since you can just deploy more instances.

And I could print my own paper currency backed by my assets.

There's been studies of competing currencies. Even when all "backing" and other aspects of a currency are equal, one tends to emerge as dominant. Upstarts then have to be BETTER at some aspect of being a currency to displace it. There's ZERO risk of devaluation due to a glut of competing currencies.

[KCIndy]

2) Bitcoin is not regulated, so basically that means any Tom, Dick or Harry can setup an 'exchange' and collect money. Lets say these people get greedy and decide to steal everything (which has happened several times already). Well, thats too bad, nothing can be done, its unregulated.

You say that like it's a bad thing!

Being unregulated is one of the best things about Bitcoin.

Besides, few things are more regulated than banks, yet each year millions of dollars are scammed from trusting dupes by people PRETENDING to represent banks on the internet, email, telephone and U.S. mail. Mountains of regulation - indeed, hundreds of thousands of pages of the stuff backed by tens of thousands of armed agents of the government FAIL to prevent these scams every year.

And if someone who has lost his life savings to one of these scams complains to the Almightly Regulators, the answer they inevitably receive is, "Sorry - sh*t happens. File a form, would you?"

[Tod]

I'm waiting for it to slide below $450 so I can make another buy, but it's stubbornly refusing to do so!

So much for that stubbornness......already well below $450 at $419.

Maybe if you wait until tomorrow it will be even lower!

I procrastinated buying in because I felt like I was not knowledgeable enough about how it works and how to safeguard my purchase. So far my worries were unfounded in that I would have lost money no matter what I did to safeguard my purchase.